This blog is a direct transcript from the video below. This comes in 2 versions: You are able to watch the video, read the blog for your convenience.
Do yourself a favor and make yourself comfortable, and read this from beginning to end if you’re considering building a brand new home. In this blog post, I am going to touch on important things you need to keep in mind before jumping headfirst into the process as well as some state specific information for my Michigan folks out there.
If you’re on the fence about buying an older home or building a new home, there’s a link HERE to a video I did on just that question alone. I include scenarios and factors you may have never even thought about, so be sure to check that video out.
Also, if you’re looking for more insight about buying land in Michigan, I will include another link HERE to one of my videos covering just that as well. A lot of people underestimate the complexity of purchasing land, so be sure to give that video a look as well. It’s relatively short so it won’t take up too much of your time.
Alright, let’s jump into this!
After looking at 20 homes, you’ve decided that none of the homes fit your style, your vision, or your future goals. So you dabble in the idea of building a brand new dream home that checks all the boxes.
Building a home is one of the most exciting, overwhelming and stressful learning experiences you’ll ever face in your lifetime. Not only is it a massive investment, it’s an adventure that calls for a stable mind to say the least. That should be a given of course, especially since you’re starting out with a blank canvas. It’s safe to say most people looking to build a home are a little naïve about the whole process, which makes sense, but the last thing I’d want is for you to regret the decisions you make throughout the process, and that’s where this post comes into play.
Let me break down 8 important things you need to know before you build a home.
Number 1 – Before you even consider what tile is going into the bathroom, consider setting a budget, especially one that has a little bit of wiggle room. You’ve probably seen enough HGTV real estate shows where the contractors always call the new homeowners and say “we have a problem” then it destroys their budget and they aren’t able to get the $25,000 Persian silk rug for their living room anymore.
It’s important to get a quote ahead of time that breaks down the cost for amenities, materials, labor costs, permits, down payments (and what the plan is for that as you’ll typically pay in stages), warranties, architecture and engineered drawings if necessary. Understand that building a home is going to cost more than you think so creating a budget that has room for error would be ideal.
With an extensive list of expenses like that, you may want to consider putting a little sweat equity into the home, meaning don’t hire someone to do every single thing in the home, make it a learning experience and do it yourself, your wallet will thank you.
As far as financing the build, there are construction loan options that will meet the project’s requirements and pay the builders at each stage of development. Each stage will be inspected to ensure a certificate of occupancy can be issued, which is required by Michigan building code when there is a building permit issued and completed by following current codes. It’s also very important that you’re around during the stages of the build to ensure the project’s funding is going as planned.
Which brings us into number 2, developing a plan. Creating an outline to guide the whole entire process is crucial, so be sure you define what you want to build, what finishes you want in the home, as well as what type of home you want to build.
You’ll also want to have an idea of the desired outdoor space, size of the home, the layout of the home, the direction at which the home faces, what storage space you need, kitchen design preferences, bathroom layout, where you want your appliances located, which effects the placement of plumbing and electrical, as well as where you want beds, chairs, dressers, desks and tv’s placed in the home. That might not seem to be a big deal, but understand that you’re building a home from scratch (or template) so it should comply with your lifestyle.
While developing that plan, keep number 3 in mind, choosing the right location. Oftentimes, newly constructed homes aren’t built in the most desirable locations, as builders want to save a little bit of money by building homes farther from town. Again if you have questions about finding or buying land, the link HERE if you want a more in depth explanation of the steps and potential costs associated with it. Keep in mind that location is also something that will affect the resale value, so understand what the surroundings are like, as well as determining whether the land features are suitable for your goals.
If this new build isn’t going to be your forever home, take number 4 to heart when I say keep the resale value in your mind. Maybe it is your forever home, but an unpredictable situation occurs, your job gets relocated, you have triplets, or your neighbors are extremely annoying, whatever the situation may be, it’s important to keep an open mind.
One of the main pieces of advice when selling a home, is depersonalizing the space that goes for new construction homes as well, especially when the builder is offering this crazy sweet package that upgrades everything out of the ordinary for no apparent reason. Don’t invest in that, all it will do is over price the house and limit the buyer pool when the time comes.
That brings us to a very important decision you need to make when starting the process, and that is number 5, picking the right builder for the job. Make sure you do your research, don’t just say yes to the first builder you come in contact with, take a look at the reviews and do something no other source would tell you to do, and that is look up their portfolio on their website, usually they will showcase all the work they’ve done in the past, figure out where those homes are and either have your Realtor (if you have one) or you personally go and knock on the doors of those homeowners and ask them their honest opinion about how the home is built. This allows you to go right to the source and get some answers, it’s a very powerful solution especially if they are homes that were built a few years ago which is a great test for the homes durability.
You’ll also want to know if the builder is licensed and insured, as well as an extensive history of building homes. It’s also important to understand what their building style is and if you even like it, and of course the build has to be in your price range. Another point that a lot of new construction folks don’t keep in mind is the personality of the builder.
Which takes us to number 6, communication. The personality of the builder is important because you are going to be with them for a large chunk of time, so make sure it’s a person you’d actually like to deal with. Make sure you’re contacting the building constantly, and don’t think for a second you’re bothering them too much, you’re putting your hard earned trust and money into someone to make your dreams come true, so don’t be afraid to make sure your dream is being developed properly.
Number 7 – Understand the building rules and regulations in the area. You may need to comply with certain safety standards, and if you don’t you could face penalties that could diminish your budget. If you’re unsure, reach out to local authorities to ensure you’re abiding by all the rules and regulations. You’ll also want to make sure that you approach any and all paperwork with caution, make sure there aren’t any hidden clauses or fees in the contract before you sign the fine line.
Last but certainly not least, number 8, understand that everything has a pension to change and errors are going to happen it’s just a matter of when. As I mentioned before about making a budget, be sure to set some additional funds aside, so no matter what mistakes arise, you have it covered and you can proceed with confidence.
Now let me touch on a little Michigan specific information.
Stick around because your state’s or country’s values could be similar. When it comes to buying land in Michigan, the average cost per acre is roughly $23,765. That price will most definitely fluctuate depending on the location. The average cost of building a home in Michigan is $116 per square foot, this number is based on a Detroit statistic which I thought would be appropriate because when people think of Michigan they think of Detroit and the numerous suburbs surrounding.
The square foot range is between $90 and $150, but that doesn’t account for upgraded home packages. The labor costs are between $100-$150 an hour for an engineer and an architect, while the contractors are based on location and demand. Major systems and appliances in a home are between $25,000 and $55,000, depending on whether or not you decide to energy efficient items that will cost more upfront, but cost less in the long run.
So I bet this whole thing sounds like a whole lot of money, and your right it is, but there are ways to save money and avoid paying more than you need to. First course of action is to maintain a great credit score by paying your bills on time, and paying off debts. You’ll also want to do your research as I mentioned before for builders, as well as all the people involved in the process such as: engineers, architects, carpenters, electricians, plumbers, landscapers, furniture companies, interior designers, and suppliers for the majority of the materials, and lastly don’t forget about the resale value.
I know that you’re tempted to build a home unlike any other, but understand that if you ever needed to sell that home, it may be too unique to the majority of homebuyers and potentially hurt your chances of selling the home for top dollar.
It’s safe to say there’s a million different things you need to think about when building a new home. With the ability to be creative, comes important decisions that need to be made with a level head, so be sure to be calm and collected throughout the process so nothing is looked over or neglected.
Andrew McManamon is a Michigan REALTOR® with Signature Sotheby’s International Realty and provides real estate services to Buyers, Sellers and Investors throughout SE Michigan including Livingston County, Oakland County, Washtenaw County, Genesee County & beyond. Andrew has become one of the rising stars of Michigan real estate agents. Prior to his real estate career Andrew was responsible for managing a senior living facility in Brighton, Michigan as a dining supervisor and an activities assistant. Andrew’s passion to help people is unlike any other, and he continues to strive to be best resource he can be. Andrew graduated from Cleary University in Howell, Michigan with a double major and currently resides in White Lake, Michigan.